BLS has received the following from the SRA. If any firm (contacted or otherwise) wishes to discuss this in confidence with BLS President, Ashley Palminteri, please contact BLS.
To Presidents of local Law Societies,
You will be aware from recent media coverage and other SRA communications that we are currently carrying out an exercise to help us understand which firms may be experiencing, or are at risk of experiencing, financial difficulties.
The prevailing economic conditions and government policy changes, such as the ban on referral fees for personal injury work and the proposed changes to legal aid, are creating financial pressures on firms, particularly in certain sectors of the legal services market. Our experience to date is that firms who are having difficulty managing these pressures pose an increased risk to their clients. However, where such firms engage early with the SRA there is a much greater chance of improving client protection and significantly reducing the potential for intervention and the associated costs.
The fact that we have made contact with a firm does not signal concern about the firm’s particular financial position. At this point, the focus of the exercise is on those firms reliant on income from PI or legal aid; parts of the legal services sector which are known to be under particular economic pressures; and firms classified by the SRA as having a potentially high impact if they were to fail.
One of the biggest risks we are encountering is where a firm fails to face up to its financial difficulties. The work we are already carrying out with firms where we have concerns is already paying dividends with action being taken by some senior partners to manage their immediate financial difficulties. By supporting firms at the outset to help them take action to return to a sound financial footing, to become more attractive to a buyer, or to ensure an orderly wind-down, we are reducing the number of interventions we have to undertake.
This email is to provide you with some detail relating to this exercise so that you are able to reassure any members who express concern or raise questions with you.
Information to be provided
The information we are seeking is confidential and/or commercially sensitive. We have put in place a secure IT portal through which the information can be provided in the strictest confidence.
We will be seeking the following information:
In relation to the most recent accounting year end:
- Net profit
In relation to a firm’s current position:
- Total borrowings
- Details of current overdraft facilities
- Highest and lowest bank balances on office accounts
- Whether or not a firm has entered into any time-to-pay arrangements or deferral arrangements with creditors
We will be contacting around 1,350 firms at the end of July by email with a request for this information, which will then be used to assess whether or not we need to increase our understanding of a firm’s financial position and determine the level of future engagement with the firm.
Should you have any comments, please email firstname.lastname@example.org.
Solicitors Regulation Authority